No, you cannot file an extension after you already filed your taxes
and yes, you are exempt from the 20% penalty after the age of 65, See HERE under subsection Health savings account.
Input the 5,110 as they recorded it, you will be charged the 6% on the excess contribution carryover from 2021 so you keep yourself safe in not triggering an audit. And then take the 860 distribution in 2023 as a nonqualified distribution without incurring the 20% penalty.
The HSA administrator should not have allowed you to withdraw the $860 in 2022 as an excess 2021 contribution, because at that point, it was already too late to withdraw the excess from tax year 2021 because the funds were withdrawn after the 2021 tax deadline which was in July of 2022.
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